Dear CGC Customers,
The purpose of this communication is to assist with explaining the Federal Exempt Overtime Premium that is starting this year. In this email, we will discuss the premium and the equation used to calculate the premium credit. Useful links are included at the bottom of the email.
Informational video and PDF are available in the Knowledge Center under the Quarter-End and Year-End section at https://cgcportal.computerguidance.com/.
The Overtime Deduction will be for 2025 through 2028, “individuals who receive qualified overtime compensation may deduct the pay that exceeds their regular rate of pay – such as the “half” portion of “time-and-a-half” compensation – that is required by the Fair Labor Standards Act (FLSA) and that is reported on a Form W-2, Form 1099, or other specified statement furnished to the individual.”
“Employers and other payers are required to file information returns with the IRS (or SSA) and furnish statements to taxpayers showing the total amount of qualified overtime compensation paid during the year.” This year, the W-2 box 14 is used.
This information came from the One, Big, Beautiful Bill link below.
The calculation as per the government:
Add all Hours Worked for the week.
Add Gross Pay (use reg rate for ALL hours. Since the premium is only for over 40 hrs/week we start with the reg rate).
Divide Gross Pay by Hours Worked to get the Average Worked Rate.
Divide Average Worked Rate by 2 to get the Premium Rate (divide by 2 to get the half portion of the rate).
Multiply the Overtime Hours Worked (hours over 40) by the Premium Rate to get the Premium Paid.
What the calculation means is that the Overtime Premium Deduction is not based on the type of pay a qualified person received during the week. It is based on the number of hours they worked in that week.
Because the calculation is based on per week, if the hours were entered on a biweekly basis there will be manual editing that must be done. The recommendation is to export out the weekly view and use that to manually calculate the overtime premium paid and then export the summary view and edit the amounts appropriately. Going forward it is recommended to discuss the change in entering the hours weekly vs editing the amounts at the end of the year on the spreadsheet.
Links with more information:
One, Big, Beautiful Bill Act: Tax deductions for working Americans and seniors
Fact Sheet #23: Overtime Pay Requirements of the FLSA
If you need further assistance beyond the information provided here, we will need you to please submit an incident. Customer Support Site .
Thank you!